Education touts loan default tool

The Education Department reported Sept. 19 that the college student loan default rate has dropped to its lowest point ever—to 5.6 percent in fiscal 1999—and that a new matching process with a Department of Health and Human Services database could help reduce that rate further.

Already in fiscal 2001, Education has collected $130 million through matching data with HHS' National Directory of New Hires, a database containing every American worker's name, address, Social Security number and quarterly wage report to help track down parents who owe child support. HHS first began using the system in 1998.

"It's just as good at finding student loan defaulters, especially those who are able but unwilling to pay," Greg Woods, chief operating officer for the department's Office of Student Financial Assistance Programs, said during congressional testimony in May. Congress authorized Education to use the directory beginning this year to help it compel those able to pay down their student loans to do so.

On Sept. 19, Education's deputy secretary, William Hansen, said the directory holds a great deal of promise for loan recovery. "It's been a real boon," he said. "We think that number [of collected dollars] will just continue to grow."

Education started a pilot program using the National Directory of New Hires in January, when a comparison of more than 2 million of its records resulted in the discovery of 1 million student loan defaulters. The department continues to obtain good matches on data files it runs through the directory, Hansen said, and the program will continue to be expanded.

"This will be one of the legs under our collection program," he said.

Although default rates have decreased, the total amount of outstanding loan money has jumped from $12 billion to $25 billion during the past eight years, according to Education.

Privacy advocates have expressed concern that by giving Education access, the directory is being used for purposes beyond its original scope.

Employers report information on newly hired employees to a state agency, which matches the reports against child support records and other state programs, such as public assistance or unemployment files. Each state also submits its new hire reports to the National Directory of New Hires, and it is a key tool in processing interstate child support cases.